5 Lessons on Consumers’ Preference for Purpose

For consumers worldwide, values are the new currency and purpose is the new paradigm. You might think this sentence was taken from the Occupied Wall Street Journal, but actually this is a quote from the latest goodpurpose study, Edelman’s annual global research study that explores consumer attitudes around social purpose. This research is an impressive effort (8,000 participants) to figure out how important purpose and values really are to consumers. The study found that purpose has a growing importance among consumers – “the power of Purpose is driving consumer preference and loyalty in a world where trust in corporations is low and differentiation between brands is negligible.”

For example, 53 percent of the responders said that when quality and price are the same, social purpose is the most important factor for them, up from 41 percent in 2010. Also, 47 percent reported that they make purchases of cause-supporting brands ‘at least monthly’ compared to only 32 percent in 2010. The study has some valuable lessons both for consumers and companies. Here are five of them:

1. Don’t take people’s word when it comes to paying premium on green products

According to the report 43 percent of the consumers are willing to pay a premium for purpose. The numbers are higher in developing countries like China (80%), India (71%) and Brazil (55%) and lower in more developed countries like Japan (29%) or UK (29%). My advice to companies would be to read these figures with a grain of salt. Usually the assumption is that about 10 percent of the consumers will pay premium for green products (see BBMG’s New Consumers research for example). Given the global economic environment and especially when 85 percent of the respondents report being affected by the global recession, there’s a better chance the average number now is lower than 10 percent, certainly not higher.

2. The bull and the bear

The report presents an interesting differentiation between Rapid Growth Economies (RGEs), including China, India, Indonesia, Malaysia, UAE and Brazil, which are bullish on purpose, and “Bear” Markets, like the US and Western Europe. RGE consumers have much higher expectations of and engagement with brands and corporations on societal issues, whereas levels commitment to purpose and values seem to be lower in developed countries. This is not the first study showing this trend, although it seems to be more reflective of respondent attitudes than in actual behavior. We’ll have to wait for further research before we can really establish who is a bull and who is a bear when it comes to intention.

3. Companies need to do more, but also need to communicate more effectively

According to the report, while 87 percent of global consumers believe that business needs to place at least equal weight on society’s interests as on business’ interests, less than a third believe business is performing well at addressing societal issues. “This performance gap is likely to drive disillusionment, disengagement and outright distrust from consumers,” the report explains.

This finding presents three challenges to companies: First, companies need to act more sustainably or as Paul Polman puts it, “to recognize that the needs of citizens and communities carry the same weight as the demands of shareholders.” Second, when a company already acts, it needs to make sure that consumers know about it – how many buyers of Dove soaps know about Unilever’s Sustainable Living Plan? How many customers of M&S know about its Plan A? Third and this might be the trickiest one, companies should learn to communicate effectively – the problem is that while consumers have higher expectations from companies, they don’t trust them too much. So companies that act and want to spread the word about their good work should find how to communicate smartly to make sure consumers not only get exposed to the news, but also find it reliable.

4. What should companies be doing anyway?

For companies that wonder what consumers are expecting them to be doing, exactly, the report provides answers. Approximately half of respondents believe organizations should donate a portion of profits (51%) and products or services (50%), while 49% believe companies should be creating a product or service that helps address a societal issue. They also think companies should be providing educational information (47%), partnering with NGOs (43%), and somewhat surprising – working with the government (45%).

5. The power of the sticks

According to the report, consumers are willing to praise those brands and corporations that support a good cause, and they will also punish those that do not. I have a feeling that companies are paying more attention to the sticks so they might want to pay attention to the favorite ways customers use to punish those companies that don’t actively support a good cause: refuse to buy products (44%), criticize it to others (44%), share negative opinions and experiences (44%), not want to work for it (48%) and not invest in it (53%).

As we can learn from the case Apple, where its sales set a new record last quarter alongside a waterfall of accusations about the working conditions at Foxconn, boycotts doesn’t seem to be too popular, no matter what people say. Still, the example of Apple shows that the power of online protests is no less and might be even greater than the power of boycotting.

Article as published in Triple Pundit, May 4, 2012 by Raz Godelnik, an adjunct faculty at the University of Delaware’s Department of Business Administration, CUNY and the New School, teaching courses in green business and new product development.

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Nike has just released its most recent sustainability report, and it is quite possibly one of the most compelling and engaging I have ever come across. Few corporate social responsibility reports keep me up past my bedtime: in fact, many hasten that hour. But Nike has launched an interactive sustainability report that educates, innovatesand brings sustainability alive.

Not all of the news coming from Nike’s Beaverton headquarters is sunny. Excessive overtime is still a nagging problem in the company’s contract factories, and Nike admits many of the factors are within the company’s control. The complete elimination of hazardous chemicals from its supply chain will take time. And the company’s water footprint is still huge. But Nike is charging ahead with a sustainability agenda that just a few years ago would have seemed unthinkable. And rather than taking a self-congratulatory tone, Nike draws stakeholders in on its journey to share the company’s successes and shortcomings.

One example of how Nike engages stakeholders is by demonstrating the impact that the 16,000 various materials used to manufacture its sporting apparel have on the environment. A tour of the Nike Material Index (NMI) allows users to compare organic versus conventionally grown cotton, learn about recycled polyester and how it outperforms nylon, and explains the various components that comprise a pair of athletic shoes. While users design their version of green athletic wear, they learn how Nike assesses the overall sustainability performance of the materials based on energy, chemistry, water and waste. Jargon that often weighs down sustainability reports is replaced, dare I say, with fun.

Such an exercise is important because it reminds customers about the challenges that emerge with the convergence of performance and sustainability. Leather, for example, is sourced from tanneries that are certified by the Leather Working Group (LWG). More consumers would rather avoid leather altogether, and Nike is open to synthetic alternatives. But all synthetics on the market use solvents that are harmful to the environment. To that end, Nike in some ways is not just a branded athletic wear company, but a chemistry research and development firm. Curiously, Nike is becoming a leader in green chemistry that would make companies like Dow Chemical squirm.

From waste diversion to improving labor rights to revamping its manufacturing operations, Nike’s driving goal is accomplish what seems impossible: stay profitable in a world with constrained resources. The company has structured its long term plan at three levels: aim for what it aspires to do, set targets and demonstrate commitments for each goal. Such an approach works because it keeps the company focused on its long term goals, holds the company accountable to what it has promised stakeholders and prevents Nike from setting expectations too high.

Start exploring the company’s corporate responsibility report and see for yourself. What Nike has accomplished is far more than just demonstrating that it is a clothing manufacturing company that is doing good. In fact, exploring the site makes you wonder why Nike still bothers with shoes and athletic gear – it should become a sustainability strategy consulting firm in its own right.

Article was written for Triple Pundit (Published May 4, 2012) by Leon Kaye, a Sustainability consultant and editor of GreenGoPost.com